[we need] policies that restore a situation where reasonable growth and reasonable interest rates can coincide. To start, this means ending the disastrous trends toward ever less government spending and employment each year

By 2038, CBO projects, federal spending would increase to 26 percent of GDP under the assumptions of the extended baseline*, compared with 22 percent in 2012 and an average of 20½ percent over the past 40 years.

Did you two visit the same country?

*The “extended baseline” is an unrealistic scenario, which includes spending cuts that are embedded in current law but unlikely to be retained by Congress. The more realistic “alternative fiscal scenario” projects even higher spending relative to GDP.

If “we” are all going to agree to be civil to one another in our discussions, and if “we” are all going to try to be less “divisive” in our approaches, then can you explain the above to me? I am not interested in hearing about people being idiots or party line hacks. Larry Summers is a fantastic economist, he has a career of writing very reasonable things, he has written things that irritate both left and right (though he is generally thought of as a man of the left) and he is surely aware of what the data looks like. So, can there be a reasonable argument made that government is getting smaller? If so, can one show me the data? If you combine all local, city, state and federal spending, rules, regulations, employment, is there something that I would learn from a better exposition of the situation than the lines of an OpEd? And beyond questioning whether Mr. Summers begs the data question, is it really the case that the trend, if true, is “disaterous?” Indeed, the crux of macro right now is that it is not clear at all – just look at the debates among macroeconomists about whether the fiscal “austerity” from last year were bad given the strong GDP growth we saw during the year (google monetary offset if you want to learn more).

Ultimately, does all of this have to be about narrative? Is there a place, or SHOULD there be a place, for less passionate discussion of things like this? I am increasingly nihilistic about what I can accomplish in a classroom at least from an intellectual standpoint. For the things that are uncontroversial, I suspect students are not interested in it. For things that seem to separate people by which tribe they are in, reason, data, empirical evidence, solid logic, etc. don’t have any bearing on how they think about it.

Why is narrative so powerful? And what sorts of things can we do in a classroom to avoid treading in those murky water? For example, if I were teaching micro right now and asked kids to draw a government intertemporal budget constraint, the second I write the term “government” we drop down the rabbit hole.

5 Responses to “Why is This Narrative So Powerful?”

I don’t know what’s the logic Larry Summers is using here, but he didn’t say “government has gotten smaller”. He said there’s a trend towards…:) He chooses his words carefully, to imply that even a decrease in the trend of growth, would be “disastrous”. Not sure why, however.

Even ignoring the glaring issue of calling something shrinking when it’s not, what about this?

>> “[we need] policies that restore a situation where reasonable growth and reasonable interest rates can coincide. To start, this means ending the disastrous trends toward ever less government spending and employment each year.”

Doesn’t that seem like a non sequitur? How do you automatically get from A to B there?

I hate to approach this with such an overly simplistic view, but I have come to recognize that oped’s are either vapid of meaning, or in attempt to give meaning to a nuanced issue, wrought with lies. Yesterday, the ever intellectually dishonest Joseph Stiglitz made the assertion that regulation is weaker today than it was in the 1920’s. There is not a single metric that supports such a claim, but it gets him closer to his point that more regulation is the only answer to fixing the financial markets (see his 2002 paper financed by Fannie Mae that gave the GSE’s a 1 in 500,000 chance of costing the tax payer a cent for the full extent of his inadequacy as an academic).

Krugman wrote about how the downgrade of France’s credit was a conspiracy between the credit rating agencies and EMU to support the view that austerity is needed, punishing the insubordinate nation. He did not give 1 piece of data to support his claim that France is doing just fine. Less than 1 month later, the Financial Times had a wonderful piece, full of economic data, showing France’s economic woes.

The point is that there people have found a way to monetize their name, by writing like pundits to the masses, hungry for opinions reaffirming their own unfounded views. I understand and respect the decision, but I wouldn’t take anything written in 800 words too seriously, unless it’s actual news.

I can swallow Summers’ first sentence about reasonable interest rates and growth rates, assuming that it is the business of economics experts to push and pull their levers to do that in the first place, a questionable assumption, given the macro guys’ track record worldwide.

The second proposition, which includes the assumption that we have actually taken net people off the government payroll, is that it will be disastrous if we were to cut anywhere. GDP would tank! By definition.

Suppose we were like Greece or Portugal, where the percentage of government workers (not counting whether they work) is higher than, say, Maryland, where the percentage of government workers is lower. Is it not beneficial to fire anyone doing nothing? Eventually, a fraction of them will move to a real job. This does not mean we fire the janitors; but we cannot afford two valets dressing one gentleman.